The housing bubble has burst

In the U.S. bond market, the housing bubble has burst. Bonds backed by home loans to the riskiest borrowers, the fastest growing part of the $7.6 trillion mortgage market, have lost about 2.5 percent since September on concern an 18-month rise in interest rates may force more than 150,000 consumers to default.

The slump in the bonds is one of the first signs the housing boom is ending after the Federal Reserve's 12 interest-rate increases. Real estate has accounted for about half the economy's growth since 2001, according to Merrill Lynch & Co.

The Fed is signaling that it's unlikely to stop lifting borrowing costs until housing cools. "Froth" in housing markets may be spilling over into mortgage markets, Fed Chairman Alan Greenspan warned an American Bankers Association convention in September. A rise in interest-only loans that initially don't pay down principle and the introduction of "exotic" variable-rate mortgages "are developments that bear close scrutiny," he said.

Post a Comment:

Comments are closed for this entry.

« Airlines cram more... | Main | So much for biodiese... »

Most popular blog postings on lowem.log :

1. 2010 Nissan Leaf electric car specifications : 107hp, 24KWh lithium-ion batteries, 100-mile range
2. 2010 Honda CR-Z hybrid, 2010 Honda Fit/Jazz hybrid models confirmed
3. 2010 Honda Civic Hybrid preliminary specifications released
4. Singapore SIBOR rate falls to 0.69% in Jan 2009, lowest since Apr 2004
5. How to insert currency exchange rates into Google Spreadsheets
6. Singapore : Nuclear power not ruled out
7. Live spot gold price quotes chart on COMEX
8. 2010 Toyota Prius specifications released : 50 mpg, 1.8L, 134hp, Ni-MH, solar roof option

Featured articles on lowem.log :

1. 2010 Honda Civic Hybrid preliminary specifications released
2. 2010 Honda CR-Z hybrid, 2010 Honda Fit/Jazz hybrid models confirmed
3. 2010 Toyota Prius specifications released : 50 mpg, 1.8L, 134hp, Ni-MH, solar roof option
4. Honda, GS Yuasa JV to make lithium-ion batteries for 2010/2011 Honda Civic Hybrid
5. New efficient nanotech materials may boost enhanced geothermal power systems
6. NYMEX crude oil recovers from $32.40 low after 2.2 mbpd OPEC production cut announced
7. Singapore property market recovery seen as private home sales surge 52% in Jul 2009
8. Singapore SIBOR rate falls to 0.69% in Jan 2009, lowest since Apr 2004

Custom Search